GBP/USD Weakens at the End of May, Due to UK Political Pressure and BoE Repricing
The pound sterling hovered around $1.342 at the end of May, heading for a monthly decline of more than 1% against the US dollar. This weakening occurred as markets added a risk premium to UK assets amid a combination of domestic and global factors.
Politically, pressure intensified after Prime Minister Keir Starmer's Labour Party suffered defeat in local elections, increasing policy uncertainty. At the same time, US-Iran negotiations to end the three-month war also shaped global sentiment, with inflation in the spotlight; a 60-day ceasefire extension agreement still awaits President Donald Trump's approval.
UK fundamentals were also seen as less supportive, including an economic composition perceived as less favorable to the technology sector, a greater reliance on oil, and pessimism about growth prospects. Vulnerability to energy shocks heightened sterling's sensitivity as markets reassessed the path of inflation and external risks.
On the monetary policy front, investors have slightly reduced expectations for a Bank of England interest rate hike this year, as oil prices eased from four-year highs and UK data showed a cooling labor market, softer-than-expected inflation, and signs of moderating activity. Market monitoring will focus on UK political developments, global oil and inflation dynamics related to the US-Iran relationship, and changes in BoE interest rate expectations reflected in the market. (asd)
Source: Newsmaker.id
